EC approves Teva's $40.5B deal for Allergan generics arm
- The European Commission on Thursday approved Teva's $40.5 billion acquisition of Allergan's generics portfolio. As part of the deal, Teva agreed to divest most of Allergan's generics business in the U.K. and Ireland.
- Additionally, Teva will also divest "certain overlapping molecules" in 24 European countries, excluding the U.K., Ireland, and Iceland.
- If the merger passes muster with the U.S. Federal Trade Commission, the combined company would control over one fifth of the generics market, according to estimates by the American Antitrust Institute, a non-profit advocacy group.
Generics are big business for Teva. Its generics portfolio accounted for roughly 46% of the company's revenue in Q4 2015. On the year, the business earned nearly $10 billion in revenue, with 28% profit margins. And those margins have improved notably over the past two years.
Furthermore, a strong generics business dovetails nicely with Teva's planned global rebrand. While the rebranding will first take place internally, the company hopes to become more recognizable globally as part of overall consumer health.
Acquiring Actavis (Allergan's generics portfolio) will boost Teva's edge for Novartis' Sandoz unit, which accounts for a little over 11% of the market, according to the American Antitrust Institute (AAI).
AAI opposes the merger and, in a letter to the US Federal Trade Commission, argues any planned divestiture would do little to ameliorate what it sees as negative impacts from the merger. "The generic drug industry does not center on brands and patents. They can therefore not be sold as part of a structural divestiture remedy," AAI wrote.
Teva did announce a number of divestitures as part of the EC's approval. It will shed Allergan's generics business in the U.K. and Ireland, while conversely divesting its own generics business but retaining Allergan's in Iceland.
The company said it would continue to work closely with the FTC in order to win approval in the U.S.
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